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Investment Opportunities: How Does Real Estate Crowdfunding Work?

17 May 2023
Investment Opportunities How Does Real Estate Crowdfunding Work

No one should feel bad about hoping for a day when they wake up free from concern for themselves and their loved ones. That is why people are becoming more careful with their savings as they gain experience and knowledge. Especially today, when there are many options for profitable investments, such as the affordable house and lot for sale packages offered by Lumina Homes.

 

Historically, only accredited and institutional investors had access to real estate investments due to the high barriers to entry. Fortunately, real estate crowdfunding became popular in the 21st century as a new way to diversify one's investment portfolio. Crowdfunding has helped real estate investors avoid the significant barriers to entry associated with real estate investment trusts (REITs) and traditional real estate investment syndicates.

 

 

What is Crowdfunding in Real Estate Investments?

If you're hesitant to invest on your own, which is particularly true for first-time investors, you may find that joining a group allows you to explore more opportunities, some of which may become lucrative.

 

Accredited investors used to have a leg up on the competition since they had the financial resources to overcome the industry's high barrier to entry. However, as the market has matured, ordinary individuals who have the means can now start their own investments in the real estate market.

 

Real estate crowdfunding is a means to generate funds that is very similar to crowdsourcing but is specifically geared toward real estate ventures.

 

A large number of small investors combine their funds to purchase real estate. Using crowdfunding websites makes it simple for anybody to discover and put money into promising real estate ventures without having to consider such factors as the magnitude of their potential return on investment, the cost of necessary repairs, or the possibility of eviction.

 

 

2 Types of Crowdfunding

There are two forms of crowdfunding that you may acquire as a real estate project investment:

 

 

1. Debt investments

An investor may provide funding for a specific construction project by extending a loan to the builder in the form of a debt investment. There is lesser chance of loss here than there would be with an investment in stocks, and you will get all proceeds before anybody else.

 

 

2. Equity investments

The highest rate of return may be found in stock market investments. This strategy involves selling a piece of your property to an investor for a profit. This one is ideal if you find yourself in an unexpected financial bind, but it also increases the inherent danger of the situation since you are now sharing the property with someone who stands to earn more than you.

 

 

Crowdfunding Platforms to Start Real Estate Investing

As we mentioned earlier, you need to join a crowdfunding platform in order to start your crowdfunded real estate investments. We collected some of the real estate crowdfunding sites that you might want to try joining one of these days:

 

 

Flint

If you are searching opportunities to diversify your real estate projects, you will find this crowdfunding site to be of tremendous assistance.

 

In the Philippines, Flint is the first real estate crowdfunding platform that is both low-cost and enabled by technology. Filipinos and foreigners as young as 18 may use this site to invest without running afoul of any laws. In most cases, a minimum amount of Php 1, 000 is required, making it a perfect investment opportunity for millennials.

 

 

UPbuilds

It's a no-cost resource with a library of educational materials that a potential real estate investor may peruse to get a feel for the platform.

 

In this case, the Matapat Na Pagtutulungan Multipurpose Cooperative is in charge of the site's administration. It is one of the real estate crowdfunding platforms which allow many Filipinos, particularly OFWs, to build secure financial futures for themselves. In addition to real estate, they also provide prospects in the agricultural market.

 

 

SeedIn

Since its official debut in February 2014, SeedIn has grown to become South East Asia's preeminent business finance platform.

 

In this forum, companies may find investors to whom they can pitch their ideas and ask for finance. Since its inception, they have successfully managed Php 10, 376, 696, 292 in money while promoting its core principle of "demand meets supply."

 

SeedIn also serves as a platform for company issuers to connect with individual or accredited investors.

 

 

Pros and Cons of Real Estate Crowdfunding

With you gaining a better understanding of crowdfunding and how it works for potential investors to diversify their investment portfolios, it is also noteworthy to know its benefits and drawbacks.

 

 

Crowdfunding Advantages

Earn Passive Income

Taking your time to think through the options and choosing the proper real estate project, you may build a passive income stream without putting in a lot of time or effort. Crowdfunding for real estate is a convenient alternative to the more labor-intensive methods of real estate investments that need you to handle all of the management and monitoring on your own.

 

Lower Minimum Investment

The risk involved is substantially less than with other types of investing. This implies that there is a reduced required minimum investment, making it possible for even modestly well-off individuals to try their hand at investing in a property or project. Beginners in the investment area may find this encouraging.

 

Portfolio Diversification

Crowdfunding real estate investments are a fantastic means of hedging against market volatility. In addition to bolstering your portfolio, this also has lesser potential long-term risks.

 

 

Crowdfunding Disadvantages

Accreditation

You might be required to be an "accredited investor," i.e., someone with a high income, to use some real estate crowdfunding platforms. Although some sites welcome non-qualified investors, the majority continue to cater to accredited traders alone.

 

Illiquidity

Putting money into real estate is a low-liquidity investment. Because of this potential lack of quick resale value, real estate investments are often considered illiquid. Therefore, in the event of a sudden need for cash, illiquid assets such as real estate won't be of much assistance since they take a while to put up for sale on the market. There's also a tendency that the property's value might fall in the midst of the selling process if this occurs.

 

Lower Returns

The return on investment for real estate crowdfunding is often substantially lower than the return on investment for actual property ownership. The reason for this is that while dealing with a third party, the quantity of money you make will inevitably be cut because of the necessity to pay for their services.

 

Crowdfunding is more than just a fad of the 21st century; it's a novel and exciting method for real estate investors to obtain funds and one of the simplest ways to enter the real estate market. This is awesome if you are just starting to explore traditional real estate investments with a minimum investment amount of money.

 

Another way to diversify your portfolio in a long run with a lesser risk is by putting your savings in an affordable house and lot and converting it into a rental property or AirBnb.

 

Just make sure that your house and lot Philippines are situated in a strategic location that can give the best convenience and movability to the residents and renters.

 

These important features can all be found in any Lumina Homes community across the country with its proximity to major facilities and infrastructure, industrial parks and transportation hubs, as well as marketplaces and shopping malls.

 

Discover the perfect Lumina Homes for your lifestyle and be part of our sustainable community today!

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